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ASSET RECOVERY INCREASING WORTH OF HIGH-TECH PRODUCTS

Companies are developing ways to expand the revenue-earning potential of high-tech and electronics products throughout their life cycle.

In the world of electronics and high-tech products, the days of “segmented thinking” are over. In the past, the major segments, or stages, in a product’s life cycle – original sale to the customer, after-sale service, return to the manufacturer, and product disposal – were considered and managed separately. Now manufacturers are recognizing that to maximize a product’s worth, they have to adopt an end-to-end approach that focuses on a product’s lifetime value. This means first, treating each individual item as an asset, and second, identifying and leveraging opportunities to generate revenue throughout a product’s existence, from initial manufacture to end of life.

Asset recovery is becoming increasingly important as a way to maximize the lifetime value of electronics and other high-tech products – not just for obsolete or end-of-life items, but also for any product, part, component, or material that is no longer wanted by the customer. There are a number of ways to do this, including repairing damaged products, refurbishing/upgrading out-of-date items for resale or redeployment, and recycling discarded or unusable products to extract value from the materials used in manufacturing them.

The opportunities to capture more revenue from high-tech products are rapidly growing. One reason is that product life cycles are getting shorter, and both consumers and businesses acquire new products and discard the old at a faster rate than in the past. Another is that the sharp rise of e-commerce is fueling the growth of product returns. In a Consumer Electronics Association study of product returns, around 22 percent of adult online shoppers in the U.S. reported that they had returned some type of consumer electronic device or accessory in 2014. About half of these returns resulted in an exchange for the same product or brand.

Another driver of the increasing opportunity for asset recovery is regulation. Governments around the world are shifting responsibility for end-of-life disposition onto manufacturers and retailers. The European Union’s Waste Electrical and Electronic Equipment Directive, for example, requires sellers to accept, free of charge, any of their products brought in by customers for recycling. The aim is to have 85 percent of the EU’s e-waste properly recycled by 2019.

All of this is contributing to a veritable flood of high-tech product returns.

About US $19 billion is spent on returns every year. The returns rate for the consumer devices, for instance, runs between 4 and 10 per cent. That's a lot of product moving around the world.

Paths to Recovery

How can companies extract the greatest value from returned items? One option is to screen them for faults, and then repair and/or resell them where possible. Roughly 20 to 50 percent of returned electronics are faultless; perhaps the buyers had software issues, changed their minds, or installed their purchases incorrectly, explains Watson. Reselling these units extends their useful life and generates additional revenue.

Another way is to recycle old devices – a product stream known as e-waste. Again, the volumes are huge. The Solving the E-Waste Problem (StEP) Initiative, a partnership of United Nations and nonprofit, industry, and governmental organizations, calculates that by 2017, the total annual volume of e-waste will be 65.4 million tons – enough to fill a line of 40-ton trucks stretching three quarters of the way around the Equator.

Companies can also recover business-grade products and equipment, such as network infrastructure, when buyers upgrade to newer technology. These can be sold in business markets, to smaller businesses, or in some overseas markets where having the “latest and greatest” equipment is not a priority.

Business-to-business electronics tend to be worth more than used consumer items, and this makes recovery in corporate markets quite lucrative.

There is alot of value in these assets to begin with, and they tend to retain a significant amount of that value.

But extracting monetary value from used high-tech products is not the only incentive for developing efficient recovery processes. In the case of e-waste, for example, scrapped electronics contain precious materials such as rare earth metals and minerals that are in short supply and are subject to price volatility. Moreover, many of these critical materials originate in risk-heavy regions like central Africa, where access to supplies could suddenly be blocked. Recovery, therefore, is an important means of ensuring supply continuity.

Solutions for Complex Challenges

Recovering the value of high-tech assets is by no means straightforward. The reverse supply chains for these products are highly complex. Companies must be able to assess the value of a diverse portfolio of products that arrive damaged, faulty, or obsolete. Each type of product – whether it is destined for resale, redeployment, or recycling - requires a specific set of logistics processes. There are bureaucratic complexities to deal with as well; complying with the terms of various warranty agreements, for instance. Companies also have to keep in mind that reverse supply chains must perform in much the same way as forward-facing operations in key areas such as inventory management and asset tracking. And the entire recovery process must comply with environmental codes.

There are challenges, but there also are solutions. Allowing for end-of-life issues in product designs is one approach. Making products easier to disassemble, for example, would streamline the recovery process. Manufacturers could also make returns services or exchange opportunities for end-of-life items part of their product offerings.

High-tech companies also have the option of outsourcing the management of their reverse supply chains. A third-party logistics provider (3PL) with expertise in reverse logistics and asset repair and recovery can not only provide technical support but can also integrate that service with inventory, warehousing, and logistics services, says Watson. The fact that the 3PL is fully independent and doesn’t have a stake in the product itself is a benefit, he adds.